COLOMBO, April 8 (Reuters) - Sri Lankan shares rose for a fourth straight session on Friday to end at their highest close in eight weeks as retail investors bought beaten-down stocks.
However, continued foreign outflows on worries over macroeconomic stability weighed on sentiment, dealers said.
Foreign investors offloaded a net 56.6 million rupees ($391,695.50) worth of equities, their seventh straight session of selling, and extending the year-to-date outflows to 3.3 billion rupees.
The benchmark stock index ended 0.73 percent higher at 6,275.62, its highest close since Feb. 12.
"Mostly it is retail-driven. With the prime minister's visit to China, we have seen some interest in manufacturing sector," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.
"With the interest rates and the economic uncertainties, we think this run is short-lived."
Prime Minister Ranil Wickremesinghe is on a three-day visit to China.
China and Sri Lanka are both determined to push forward with a stalled port project in the Sri Lankan capital Colombo, a senior Chinese diplomat said on Thursday following a meeting between the premiers of the two countries.
Turnover was 764.9 million rupees, just below this year's daily average of 790.7 million rupees.
Analysts, however, said investors are cautious about macroeconomic uncertainty after a rating downgrade and unclear capital gains tax.
Sri Lanka last week postponed a plan to reintroduce capital gains tax by six months after the move threatened to dent foreign investor sentiment.
Stockbrokers said the concern now is how the government is going to impose the tax, rather than the tax itself.
Higher market interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have also weighed on investor appetite, dealers said.
Analysts and economists worry slower growth could reduce corporate earnings of some listed firms.
Shares of Carson Cumberbatch Plc jumped 3.09 percent, while the country's biggest listed lender, Commercial Bank of Ceylon Plc, gained 1.59 percent.
The market will see subdued trade in the coming days due to the Sinhala-Tamil new year on April 13 and 14, traders said. ($1 = 144.5000 Sri Lankan rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sunil Nair)